Crude Oil Price update: Brent closes at 111 a barrel. The impact of events in Japan

Oil prices further decreased over the weekend, with Brent closing in at a two-week low of USD $ 111 a barrel. The earthquake and tsunami in Japan has led to the closure of the majority of automobile and electronic firms, and a risk to the country’s numerous nuclear plants. This is expected to have a two-fold effect on oil prices; bearish in the short term and bullish in the long-run. Demand for oil from Japan is expected to be low in the foreseeable future, owing to the economic slowdown which the country is going through. However, oil prices for later this year are expected to be greater, since Japan will turn towards fossil fuels to substitute the 9700 megawatts (MW) of nuclear power capacity lost due to the natural catastrophe.


The situation in the Middle East appears to be easing out. Libya is still engulfed in heavy fighting, with pro-government forces wrestling back control of major oil producing towns such as Ras Lanuf from the control of the rebels. The international community is debating whether to establish a no-fly zone over Libya in order to help the rebels. However, it is widely believed that OPEC has increased its production in order to ensure that oil supply is not affected due to the situation in Libya. Furthermore, concerns about unrest spreading in Saudi Arabia have been temporary put to bay after there was muted response to the Day of Rage protests scheduled on Friday. Moreover, in Bahrain, the crown prince assured the opposition of holding national dialogue. Thus, speculations about supply bottlenecks have eased, which are expected to lead to a decrease in oil prices this week.